French Finance Bill 2024: implementation of Pillar 2

French Finance Bill 2024: Pillar 2 – Article 4: Implementation of Directive (EU) 2022/2523 of December 14, 2022, aiming at ensuring a global minimum taxation level for multinational corporations and large-scale national groups

What is Pillar 2?

Pillar Two (Pillar 2), also known as the Global Anti-Base Erosion (GloBE), is an international framework established within the OECD/G20 project on base erosion and profit shifting (BEPS). Approved by the OECD/G20 Inclusive Framework on December 14, 2022, Pillar 2 introduces a set of model rules designed to ensure a global minimum taxation level for multinational corporations (MNC) and large-scale national groups.

What’s the objective?

Implementing these rules on the minimum taxation of the multinational corporations’ profits will counterbalance a significant proportion of profit shifting to low or no-tax countries and protect the tax bases of applying countries. The objective is to ensure a minimum taxation level for multinational corporations and large domestic groups.

The Council of Ministers of the European Union supported the agreement reached in the OECD/G20 Inclusive Framework in its conclusions of December 7, 2021, committing to its implementation with due consideration to European Union legislation. This led to the adoption of Directive (EU) 2022/2523 on December 14, 2022, ensuring a global minimum taxation level for multinational corporations and large domestic groups in the European Union.     

What is the outcome?

In France and other implementing countries, this reform introduces a global minimum Effective Tax Rate (ETR), an additional tax distinct from corporate income tax.

This supplementary tax will apply to French companies that are part of multinational corporations with consolidated sales exceeding €750 million in at least two of the four preceding financial years. It will also apply French companies belonging to a group and operating exclusively within French territory, meeting the same sales threshold.

The main purpose of the system is to charge the group’s parent entity with an additional tax if the combined effective tax rate of the group’s companies in the same state or territory is below the minimum tax rate of 15%.

How is the Effective Tax Rate (ETR) calculated?

The Effective Tax Rate (ETR), determined for each state or territory in which the group operates and for a given financial year, is calculated by the ratio of income tax and equivalent taxes to the income earned by entities in that state or territory. To prevent distortions between states and neutralize legislative differences, the income of the entities considered in this calculation is based on the financial statements drawn up for the group’s consolidated accounts and is subject to specific, harmonized restatements in order to determine a „qualified income“ for each of these entities. The amount of taxes considered is also subject to specific and harmonized restatements.

In the case of under-taxation of entities in a given state or territory, an additional tax is levied, whose base is determined by the qualified income used to calculate the effective tax rate, and which is equal to the difference between the minimum rate of 15% and the effective tax rate in that given state or territory.

What is the transposition into French Law?

The OECD/G20 Inclusive Framework agreement and Directive (EU) 2022/2523 allow states or territories to introduce a national top-up tax. This supplementary national tax applies to subsidiaries of a group that is under-taxed in a given state or territory and is levied by that same state or territory.

While Directive (EU) 2022/2523 establishes the rules applicable in the European Union and certain adaptations necessary to respect the freedoms guaranteed by the Treaties, Recital 24 recalls that these rules must be implemented and interpreted in accordance with the OECD model rules, clarified by the explanations and comments from the OECD/G20 Inclusive Framework. Article 4 of the French Finance Bill 2024 follows these principles in transposing Directive (EU) 2022/2523 considering the comments and administrative guidance from the OECD/G20 Inclusive Framework, including after the adoption of the Directive.

What does Article 4 of French Finance Bill 2024 say?

The purpose of Article 4 of the French Finance Bill 2024 is to transpose the rules of Directive (EU) 2022/2523 into domestic law, enabling the introduction of a 15 % minimum taxation level for the profits of multinational corporations with a presence in France, as well as large national groups exclusively operating within French territory.

Article 4 of the French Finance Bill 2024 intends to exercise this option and introduce a complementary national tax in France. This supplementary national tax is levied on the same tax base as the supplementary tax established under the IRR. Its amount corresponds to the additional tax resulting from the difference between the minimum tax rate of 15% and the effective tax rate applicable to the constituent entities located in France. To avoid double taxation, the supplementary national tax may be offset against the additional tax calculated in accordance with the IRR or UTPR.  

This article also specifies the procedures for applying the rules in case of structural modifications to the group’s scope of consolidation (restructuring). It also defines the reporting and payment obligations of the group’s entities subject to these rules, as well as the penalties for non-compliance with these obligations.

As the OECD is still running working groups on the practical implications of these rules, in particular reporting obligations, this article empowers the Government to adopt subsequent measures through ordinances concerning reporting, collection, control, and penalties of additional taxes under these new rules.

When does Pillar 2 come into force?

Finally, this article incorporates provisions from the OECD administrative instructions published on February 2 and July 17, 2023, falling within the scope of the law. The minimum tax rules will apply to fiscal years beginning on or after December 31, 2023, except for UTBR, which will apply to fiscal years beginning on or after December 31, 2024.     

If you have further questions, our accountants will be happy to provide you with personal advisory. Additionally, we are available to advise you throughout France and Germany by phone and video conference. Your Franco-German tax consultancy FRADECO.


Although the greatest possible care has been taken in the preparation of this newsletter, we reserve the right to make changes, errors, and omissions. The abstract legal presentation in this newsletter is no substitute for individual civil and tax law advice on a case-by-case basis. Subsequent changes to the legal framework, the views of the German or French tax authorities or case law, including with retrospective effect, are possible.